Correlation Between Vulcan Materials and Virgin Wines

Can any of the company-specific risk be diversified away by investing in both Vulcan Materials and Virgin Wines at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vulcan Materials and Virgin Wines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vulcan Materials Co and Virgin Wines UK, you can compare the effects of market volatilities on Vulcan Materials and Virgin Wines and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vulcan Materials with a short position of Virgin Wines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vulcan Materials and Virgin Wines.

Diversification Opportunities for Vulcan Materials and Virgin Wines

-0.37

Correlation Coefficient

Vulcan Materials  Virgin Wines

Very good diversification

The 3 months correlation between Vulcan and Virgin is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials Co and Virgin Wines UK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Virgin Wines UK and Vulcan Materials is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vulcan Materials Co are associated (or correlated) with Virgin Wines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Virgin Wines UK has no effect on the direction of Vulcan Materials i.e., Vulcan Materials and Virgin Wines go up and down completely randomly.

Pair Corralation between Vulcan Materials and Virgin Wines

Assuming the 90 days trading horizon Vulcan Materials Co is expected to generate 1.22 times more return on investment than Virgin Wines. However, Vulcan Materials is 1.22 times more volatile than Virgin Wines UK. It trades about 0.08 of its potential returns per unit of risk. Virgin Wines UK is currently generating about -0.21 per unit of risk. If you would invest  23,784  in Vulcan Materials Co on October 7, 2024 and sell it today you would earn a total of  1,926  from holding Vulcan Materials Co or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vulcan Materials Co  vs.  Virgin Wines UK

Vulcan Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Virgin Wines UK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Virgin Wines UK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Vulcan Materials and Virgin Wines

The main advantage of trading using opposite Vulcan Materials and Virgin Wines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials position performs unexpectedly, Virgin Wines can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Virgin Wines will offset losses from the drop in Virgin Wines' long position.

The idea behind Vulcan Materials Co and Virgin Wines UK pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.